Wells Fargo & Co. has been made to cough up with higher fines on Friday in respect of allegations that its mortgage and auto-lending businesses have abused consumers. This apart, Office of the Comptroller of the Currency (OCC) indicated that it has enough powers to remove either executive or board members after slapping a fine on the bank. The latest action is in contrast to the years of practice of slapping big fines on the corporate thus punishing the shareholders and allows executives escape from the misconduct.
Wells Fargo will pay a fine of $1 billion as part of a settlement on allegations of mistreatment of consumers, BloombergQuint reported. This is the biggest sanction under the American President, Donald Trump, who was believed to be going soft with regulations. However, his tweet in November was a clear indication of what is in the pipeline for the industry. It was generally believed that Republican lawmakers, as well as, regulators were soft on fining the big corporate.
However, Trump had to express his hire in a tweet about Wells Fargo thus making the GOP sing a different tune for a change. The president has issued a warning that penalties and fines against the banks could be increased substantially apart from indicating that there might be more to follow. He was more categorical when he stated that punishments would be much more severe if any firm was caught cheating. The bank has a tough time with the regulators after the phony accounts scandal in 2016.
The Consumer Financial Protection Bureau (CFPB) and the OCC have slapped a fine of $500 million each on Wells Fargo. This is a record sanction as far as the regulators are concerned. The CFPB’s share of the fine is five times more than its earlier record, i.e., $100 million penalty, which was against the same company for setting up accounts without the approval of customers.
As far as OCC’s record, the fine matched with its earlier record in respect of HSBC Holdings Plc in connection with doing business with sanctioned countries apart from laundering millions of dollars for drug lobbies. Interestingly, the financial services provider has neither admitted nor denied the allegations of both the regulations. However, the bank indicated its commitment to work closely with them and trying to set right things.
Effect of Trump Tweets
According to CFPB’s Mick Mulvaney, who is also a budget director for Trump, Wells Fargo has a history of violations. Therefore, it has to be dealt with in the same response. Though $1 billion is not small money, the amount represented approximately 18 percent of the profit that the company has reported for the last quarter. Therefore, it will not have a big impact on its historical earnings number.
The American president’s tweet has its impact on other companies too. For instance, Amazon’s shares fell on April 2 after he tweeted that its deliveries drive retailers out of business. Similarly, his tweet on tariffs with China also dragged down the overall markets a few weeks back.